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Summarizing by Amir Shachmurove


Case Type:
Case Status:
Reversed and Remanded
CC-21-1249 (9th Circuit, Aug 15,2022) Not Published
In this appeal by Swarnjit Singh Sahni (CR), a creditor, of the order confirming the first amended chapter 13 plan (Plan), as filed by Yoshihiro Tajima and Tomoko Nakajima (DRs), by the U.S. Bankruptcy Court for the Central District of California (BC), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit (BAP) reversed and remanded due to the total lack of adequate findings and the Plan's facial noncompliance with sections 1322 and 1325(a), the concurring judge writing to highlight chapter 13's intrinsic tension between prompt confirmation and confirmation determinative issues' resolution.
Procedural context:
Pre-confirmation, the DRs first listed the CR's fully matured claim as "disputed" and, once the CR filed its proof of claim, both objected to the CR's $385,926.55 proof and launched an adversary proceeding challenging the amount and validity of the CR's junior lien on their residence (Home). In their objection the DRs alleged a failure on the part of the CR to provide the disclosures required by the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA), thus justifying rescission and leaving the CR with, at best, an unsecured claim in a vastly reduced amount; these same theories underlay their adversary proceeding, which not only objected to Sahni’s claim but further requested a reduction of the interest rate to 7.89%. In response, the CR conceded that he did not make TILA and RESPA disclosures but argued that he was not a "creditor" under either statute; furthermore, he attacked the rescission notice as untimely and pointed out that the statute of limitations had run and the DRs had and could not tender the rescission amount anyway. In the midst of these disputes, and in response to objections from the CR and the chapter 13 trustee (TR), the DRs withdrew their original plan, which had paid nothing to the CR, and filed an amended plan. In this first amended plan, the DRs identified the CR's claim as secured and proposed to pay a portion of the claim amount, with interest at a non-note rate, over the 5-year life of the plan, and provided for unspecified modification or dismissal if the DRs' claim objection failed. To this effort, the CR objected. At the confirmation hearing, the DRs proposed an additional lump sum payment in month 24 which would purportedly allow payment of the CR's claim in full over five years at an amount that assumed litigation success. The plan as proposed by the DRs and with this adjustment constituted the Plan that the BC confirmed.
Prepetition, the CR held a second trust deed over the Home to secure a note evidencing a $300,000 hard-money, high-interest, short-term loan (Loan). The note bears non-default interest at 10% and matured pre-petition, approximately one year after origination. When the DRs proved unable to repay the Loan, the CR turned to a state court for the usual remedy. On the eve of the CR's foreclosure under the junior trust deed encumbering the Home, the DRs filed for chapter 13 bankruptcy. Based on their papers, the DRs owed only a small priority tax debt and a single unsecured credit card claim; while two trust deeds encumber the Home, the senior secured debt was never in default. As for the CR's claim, plan. the DRs tagged it as “disputed"; additionally, their schedules reflected that the CR was over-secured and "evidence[d] no ability to pay the claim amount in full in equal monthly installments over 60 months." Subsequent to these documents' docketing, the CR filed a proof of secured claim in the amount of $385,926.55, all of which was characterized as arrearage in the form of unpaid principal, interest, late fees, and pre-petition attorneys’ fees.
Laura S. Taylor; William J. Lafferty; and Scott H. Gan

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